Hydro rate hike set at 4 per cent

WINNIPEG — The Public Utilities Board said it had no choice but to approve a higher general rate increase than Manitoba Hydro had requested because the Crown utility is in a financial bind thanks to prolonged drought.

“Water flows into Manitoba Hydro’s watershed are currently at the second-lowest level in 112 years. As a result of the severe drought, Manitoba Hydro’s financial metrics have deteriorated by more than $625 million,” the board said Tuesday as it announced it had approved a four per cent rate hike, to take effect Jan. 1. Hydro had applied for a 3.5 per cent increase.

“In the board’s view, an increase equal to the legislated rate cap of four per cent is necessary to protect the financial health of the utility.”

The increase applies to all customers except those who use Hydro diesel. The interim increase will only apply from New Year’s Day until the board issues its final order. The Crown corporation has asked for an annual 3.5 per cent rate increase for each of the next three years. The PUB will issue a final order on Hydro’s fiscal 2026-28 application in the new year.

The board is an independent, quasi-judicial administrative tribunal that has broad oversight and supervisory power over public utilities and designated monopolies. It considers both the impact to customers and financial requirements of the utility when it approves rates.

Hydro spokesman Peter Chura said the utility has been clear about its challenges, including the need to replace infrastructure, develop new energy sources and the effect low water levels have had on its financial outlook.

The drought forecast has worsened since the utility’s application earlier in the year, he said Tuesday.

“We’re pleased the PUB recognized the urgent need for increased rates to allow us to make essential investments in Manitoba’s energy future,” Chura said in a statement.

The governing New Democrats froze Hydro rates this year as Manitobans struggle to keep up with the rising price of consumer goods. The last increase was one per cent in April 2024.

Finance Minister Adrien Sala, who’s responsible for Manitoba Hydro, did not return a request for comment.

The Consumers Coalition spoke against the increase at hearings in front of the board earlier this year.

The coalition — made up of the Consumers’ Association of Canada (Manitoba), the Aboriginal Council of Winnipeg, Harvest Manitoba and the Manitoba Seniors Equity Action Coalition — accused Hydro of unreasonable increases in operating and administrative costs, as well as failing to reduce spending in response to the drought.

It argued Hydro’s application was higher than necessary and would hurt the province’s poor population.

Lawyers from the Public Interest Law Centre, who represented the coalition at PUB hearings, did not return requests for comment on Tuesday.

University of Winnipeg political science Prof. Malcolm Bird said Manitoba Hydro must raise rates.

“The fact is, Hydro is in a really, really, really bad spot,” said Bird.

“It’s got an enormous debt … The condition of its transmission and generation assets is not very good, so we require enormous capital spending just to keep them — not to expand them — just to maintain them.”

The regulator’s decision illustrates that it understands the “precariousness and the enormity of the challenges facing Hydro,” said Bird.

He said the utility’s costs are rising faster than its revenue streams.

“Hydro is simply too cheap in this province. We’re not actually covering the short- and the medium- and the long-term costs of producing the electricity, hence the (nearly) $26-billion debt,” said Bird.

“Hydro has to actually increase a lot more, substantially more … and then, of course, we have the problem at the root of all of this, a failure for there to be clear separation between the operations of Hydro as a state-owned firm and its owners and shareholders in the government.”

Bird said Hydro hasn’t had an increase for about 20 months, which has allowed the NDP to keep its election promise.

Niall Harney, a senior researcher at the Manitoba branch of the Canadian Centre for Policy Alternatives, said Hydro rate increases are unavoidable.

“Obviously, no one wants to see a rate increase, but it is part of keeping hydro rates sustainable in the province,” said Harney.

He said Hydro needs money to deal with the cost of drought, pay for maintenance and infrastructure upgrades, and increase generating capacity to produce enough electricity to supply all of its customers.

Manitoba will still have some of the cheapest electricity prices in North America.

Harney said he supports the Consumers Coalition’s call for a program to exempt or provide payment plans to low-income Manitobans.

» Winnipeg Free Press